How to add a sky in cycles?
In Cycles the settings for a background do not work the same as BI.
Add a Sky Texture in Properties &gt; World if you want an automatically generated sky, or use an Environment texture for using an HDR image as the sky.
To &quot;connect&quot; a node to the backround color from the properties editor, click the little dot next to the color field, then select the type of node:

Note that you will have to manually align it to your sun lamp, or try this addon.
The best technique I have found for manually aligning the sky texture is:

Select your lamp and press . and then CtrlShiftNumpad 7 to align the view looking straight into the lamp:


Make sure you are in perspective view (Numpad 5 to toggle) and enable viewport rendering (ShiftZ)

Click and drag on the sphere in the sky texture node settings to rotate the sky texture until it is lined up with the view: